Why People Fail to Plan for Business Succession
Research has proven that over 70% of the businesses do not get handed over to the next generation. Succession planning is deliberately left unattended to, this explains the above scenario. It has become a very sensitive issue that has caused sibling rivalry, political power plays and tax hurdles. To avoid such occurrences, it is good to plan for the succession of the family business. Family business succession failure is linked to may other reasons.
Fager and McKinney 2007 explain that family business transition planning is ignored due to a couple of reasons. The pleasant times high is the first one. When the times are good, people tend to ignore the difficult and hard times. Running the business is deemed to be much better when the person is still present no when they have left.
There are some difficulties that businesses face such as mistakes in accounting, a broken plant and theft by employees. These problems must be resolved. The company will have minimal chances of being successful as the long term ramification of not planning succession. Immortality complex is the other reason. Death or sickness are the events that people do not want to be mindful of. People who run their businesses are negatively affected by the immortality complex . Family and employee disagreements ate the other reason why people avoid planning for business transition.
Family members can get emotional or political and this can lead to mismanagement of the business. The preparation for business transition is ignored by people due to these factors. Sone people are not ready to leave behind their businesses. Entrepreneurs usually feel they have accomplished a lot when they still hold on to their bisinesses. Most entrepreneurs feel they cannot let go of their businesses because of the time and effort they put in. People also ask themselves who will manage the business if they have left.
It is hard to understand tax hurdles during the event of selling or transitioning the business to the incumbents. The tax problems are then swept under the rug so that more pressing issues are dealt with. People tend to lack faith in the successor and this is one of the reasons why succession planning is neglected. The business can experience more growth when it is run by a great successor. Despite the above, the successor is normally faced with skepticism. Succession planning is not done because people want to avoid such scenarios. When succession planning is not done, it is almost certain that the business handing over will fail. The effects of not attending to these issues in the short term will escalate in the long term.